Correlation Between NRJ and ST Dupont

Can any of the company-specific risk be diversified away by investing in both NRJ and ST Dupont at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NRJ and ST Dupont into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NRJ Group and ST Dupont, you can compare the effects of market volatilities on NRJ and ST Dupont and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NRJ with a short position of ST Dupont. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRJ and ST Dupont.

Diversification Opportunities for NRJ and ST Dupont

-0.76

Correlation Coefficient

NRJ  ST Dupont

Pay attention - limited upside

The 3 months correlation between NRJ and DPT is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding NRJ Group and ST Dupont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Dupont and NRJ is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NRJ Group are associated (or correlated) with ST Dupont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Dupont has no effect on the direction of NRJ i.e., NRJ and ST Dupont go up and down completely randomly.

Pair Corralation between NRJ and ST Dupont

Assuming the 90 days trading horizon NRJ Group is expected to under-perform the ST Dupont. But the stock apears to be less risky and, when comparing its historical volatility, NRJ Group is 2.66 times less risky than ST Dupont. The stock trades about -0.12 of its potential returns per unit of risk. The ST Dupont is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5.82  in ST Dupont on September 16, 2024 and sell it today you would earn a total of  2.12  from holding ST Dupont or generate 36.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NRJ Group  vs.  ST Dupont

NRJ Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRJ Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ST Dupont

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ST Dupont are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ST Dupont sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NRJ and ST Dupont

The main advantage of trading using opposite NRJ and ST Dupont positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRJ position performs unexpectedly, ST Dupont can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ST Dupont will offset losses from the drop in ST Dupont's long position.

The idea behind NRJ Group and ST Dupont pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.